Bovis plans to pay dividend as expectations rise

Published on Friday 9 July 2010 16:17

HOUSEBUILDING group Bovis Homes plans to resume paying shareholder dividends amid growing confidence in its medium-term prospects.

The group had announced a much-reduced dividend in August 2008 before revealing plans to scrap payments altogether at the start of 2009 as it concentrated on shoring up its balance sheet in the face of the housing market slump.

In a trading update yesterday, the company said it was operating successfully in a "subdued" new homes market, with sales prices ahead of the group's internal expectations and that it intends to resume dividends provided market conditions don't worsen.

Chief executive David Ritchie said: "Given the confidence the board has in the medium term prospects of the group arising from its investment in new land opportunities and strong net cash position, the board intends to resume dividends at the end of the current financial year."

Bovis said its financial position was much improved with a net cash position of 79 million at the half-year stage. It also has loan facilities of 150m in place which provide the group with "substantial" financial headroom.

In the update covering the six months to the end of June, Bovis said it completed the sale of 803 homes, a 6 per cent increase on last year. The average sale price for private homes was 163,500, compared to 160,400 a year ago.

In the year to date, net private sales per site each week were running ahead of the same period last year and the group is on track to achieve its volume expectations for 2010. Bovis recently launched a new mortgage product in partnership with Barclays to offer housebuyers a 90 per cent loan to value mortgage at a fixed interest rate of 4.99 per cent for two years.

It has also been active in the land buying market, adding around 1,900 consented plots to its land bank since the start of the year at a cost of about 107m.

The majority of the new plots are in the south of England and terms have been agreed to acquire a further 2,500 plots.

Analyst Jonathan Jackson of Killik said the results confirmed his view that Bovis is the most attractive stock in the housebuilding sector.

"The shares trade on a 35 per cent discount to the historic tangible net asset value (520p), a level which we believe more than discounts our concerns over the medium-term outlook for the UK housing market," he said.

Last year the firm, which is focused on sites in England and Wales, completed 1,803 homes, increased reservations of its private homes by 82 per cent and cut costs by 34 per cent.